Government scraps Rs 500 and Rs 1000 notes!

This is a discussion on Government scraps Rs 500 and Rs 1000 notes! within Shifting gears, part of the Around the Corner category; Originally Posted by avira_tk
People who have a requirement for cash will come repeatedly because the government has made this ...

People who have a requirement for cash will come repeatedly because the government has made this a necessity. What makes you think that people who come frequently aren't genuine?

Today at Indian bank, Pollachi. The queue for exchange is much less than the queue for the ATM/deposit/withdraw.

This wasn't the scene on day 1/2/3. Tamil news media is repeatedly playing the applying of indelible ink, this must have done the trick. Now they are 'informing' citizens that it is being enforced only in North India and the new system isn't implemented here.

If govt sticks to what they really supposed to do (law and order) and quit all wasteful spending, we would be taxed at very low rates, and people would more willingly pay taxes.

The very point I am making - although in a country like India, there is also the need for defense and public infrastructure - and one of the longer term things that must be done if current shock treatment is to have a long term result. Rates would also be lower because more people are paying taxes willingly, a virtuous cycle.

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Originally Posted by SDP

Huh? Why are large white goods stores accepting old invalid currency?

Because the currency isn't invalid as long as banks accept it for deposit. If the said store is going to pay income tax on the income represented by these deposits, there is no law they can be accused of breaking.

There was a news report (sting operation) where it was revealed that lots of daily-wages workers (don't want to generalize ... this was in a specific area in Delhi) are standing in bank queues as a full time job since last Wednesday. Two modes of operation:
1. Get 4000/4500 in old notes from someone and get them exchanged from bank. Get paid 300 Rs for exchanging 4500 Rs.
2. Stand in queue as a proxy for someone and as the counter comes close, make a call and then that someone stands in queue for last few minutes. Again get paid something like 300Rs from each 'customer'.

The 2nd mode is still OK, but the first one is a clear fraud.

The move to mark people with indelible ink has been announced to address this problem.

Time value of money, the government has created this opportunity and the first one is clearly legal, you are getting paid for a service you provide, coming from the labour class doesn't disqualify anyone from making use of their time in this fashion, if you support the demonetization drive, be prepared to put up with it for another one and a half months. Good to see some ordinary people benefit from this, I hope you realise that outside the organised economy, wages aren't being paid because work was stopped along with this announcement. The insensitivity on this thread is unbelievable, most are completely out of touch with the plight of casual labor.

The move to mark with indelible ink is just plain stupid, to put it charitably, the banks are holding on to the money and people can't access their own funds, it's not difficult to see why people keep cash in large quantities. Not having to deal with arrogant counter staff is one such benefit.

Even after one wildly tapers down the last two figures, eg. not everyone in the family would go to exchange the currency or whatever... Remove last three zeroes, as if all were Rs. 1000 currency... Tone down further to provide for the currencies which would never be declared... With whatever disclaimers. It is a massive operation. To be concluded in 50 days.

I somehow get a feeling that there is more politics than reality. I for one am sure that the lines may (almost) vanish by next week. There are some oddballs. Outside the SBI inside iIT Kanpur campus there are three ATMs. While two are not functional one is working dishing out 2000 rupee notes. How come? I heard some stories that Unions are out to sabotage, and this lends credence to this.

Today at Indian bank, Pollachi. The queue for exchange is much less than the queue for the ATM/deposit/withdraw.

This wasn't the scene on day 1/2/3. Tamil news media is repeatedly playing the applying of indelible ink, this must have done the trick. Now they are 'informing' citizens that it is being enforced only in North India and the new system isn't implemented here.

Yes. Now the situation is better and "the ink information" has reached many "responsible citizens". If ATM is replenished regularly, things will become normal in a week.

People who have a requirement for cash will come repeatedly because the government has made this a necessity. What makes you think that people who come frequently aren't genuine?

These people are folks, who would not have seen Rs.5000 as their entire savings in their life time. They have been sent by certain black money hoarders (which the bank staff all know), in a desperate attempt to salvage some black money. How many "poor people" do you think requires Rs.4500 every day, and that too some times multiple times?

Then there were also "poor people" who did have bank accounts in that very same branch. But wanted to bye pass that and just go with this exchange scheme.

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During war time free speech is suspended, rest easy, this isn't war time, just legislated chaos. The media's job is not to push the government line, that would be propaganda, social media is doing a great job of that.

The media is clearly downplaying the positive impact of such a move. I don't blame them, because their own sources of advertisement may be from jewellers and realtors, and they are the ones sitting and crying now.

They have been sent by certain black money hoarders (which the bank staff all know), in a desperate attempt to salvage some black money. How many "poor people" do you think requires Rs.4500 every day, and that too some times multiple times?

I have a feeling that in Delhi, political parties have sent their temporary staff to try and clog the banking channel so that the common men and women refrain from visiting the Bank and eventually change their positive opinion into a negative one. This, in their opinion, could form a basis for withdrawal of demonetization scheme. How else would you explain 100 people standing outside each Bank branch since 6 AM in the morning on a daily basis without fail? Yes, indelible ink could check the rush to a certain extent but more needs to be done to ensure banking channel does not crash due to these clogged queues.

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Because the currency isn't invalid as long as banks accept it for deposit. If the said store is going to pay income tax on the income represented by these deposits, there is no law they can be accused of breaking.

A few questions for you:
1. What exactly is a "legal tender"?
2. From 9th Nov, the old 500&1000Rs notes are no longer a legal-tender EXCEPT at a petrol-pump, hospital, railway/airline counter and a few other places. Doesn't that dictate that old 500 & 1000 Re notes should and can NOT be used for transactions at any places other than the listed ones?
3. If old notes are not a legal tender at a white goods shop, wouldn't they accepting old notes in exchange of white goods amount to barter trade? How would this be different from a scenario where I walk into the same white-goods shop and offer a bag full of potatoes in exchange for a memory card and the shop agrees to that trade?
4. Is the bank obligated to accept the same bag full of potatoes if the shop guys go to the bank and try to deposit the potatoes? How is this different than the same shop trying to deposit old notes after 9th Nov...where the source of the notes is "new sales"?

In some relief to businesses, the Finance Ministry has said that limit for weekly withdrawal from current accounts has been increased to Rs 50,000. Department of Economic Affairs Secretary Shaktikanta Das has said that for business current accounts that are at least 3 months old, as much as Rs 50,000 can be withdrawn in a week. This, he said, would help pay wages of workers.

I have no accounting background, but the CA hasn't considered all cases. His suggested scheme can be tried successfully with Rs 500 notes. In case the Govt had introduced Rs 1000 new notes, there is daily cap on withdrawal. Not hoax but incorrect information.

Hmm.. Correct me if I understood you wrong. Are you saying that so far the money which was deposited is all white money? And no black money exists in India as liquid currency any where in India??

Sir, from Dec 31st every single Rs.500 & Rs.1000 note you see today are nothing but pieces of paper. There are lots of people who have stock piles of cash which has to be kept that way. Because depositing them in a bank is risky, as the amount there would be cross checked with their "sources of income".

If somebody has huge cash pile, IT,ED has to prove it is indeed black. Have disproportionate assets is not a crime in India. What is the crime then? Having income from the illegal sources. Public servants, elected representatives declare their assets, file returns. Companies are audited. In these cases, IT can question the sources of income, compare to previous years. The landlord in your case (who has never declared his income before) might deposit 5 crores cash. IT can question him. No way he will be found guilty because IT won't be able to prove his source of income as illegal. Our PM earnestly might want solve black economy but there is no legislation to back him. Demonetization might affect few but it won't solve black money problem, corruption. That is why I feel current Govt took this drastic approach without proper armor. I hope they pull it off.

The only benefit of demonetization is weeding out fake currency. That is what original RBI press release says. Rest of benefits floating around is just folks day-dreaming.

I have a feeling that in Delhi, political parties have sent their temporary staff to try and clog the banking channel so that the common men and women refrain from visiting the Bank and eventually change their positive opinion into a negative one. This, in their opinion, could form a basis for withdrawal of demonetization scheme. How else would you explain 100 people standing outside each Bank branch since 6 AM in the morning on a daily basis without fail? Yes, indelible ink could check the rush to a certain extent but more needs to be done to ensure banking channel does not crash due to these clogged queues.

Dont be so detached. I am yet to see anyone in line with a positive opinion. There is not need to turn it. You really dont understand why people are standing 30-40 deep in branches since 6 AM? Really?
Queues are clogged because of a haphazard decision. People are in line because of their own money.

Because the currency isn't invalid as long as banks accept it for deposit. If the said store is going to pay income tax on the income represented by these deposits, there is no law they can be accused of breaking.

Long story short, sawyer, I think it is not exactly the way you are saying. Government has for all practical purposes declared these currency notes as invalid. Only some emergency and/or government services have been allowed to accept these currencies for a limited period (till 24th). For everyone else, dealing in these currencies as a legal tender is just not allowed. Only recourse is to go to the nearest bank and hand these over to get valid currencies in exchange.

So, if any branded stores are accepting these currency notes in their day to day business they are indulging in patently illegal work. Also, can you please name one or two of these? I would like to tweet and check with the right people on how this is happening. Because it needs a huge collusion between the business, the banks as well as the local enforcement agencies for such things to really happen.

Long story short - see my post #547 for the last of my many posts on this thread on this subject, on the meaning of the words legal tender, what exactly it means, and what it doesn't mean, in the context of how these notes can still be accepted.

I accepted these notes myself, for the sale of my motorcycle, after the demonetisation, so I am not just preaching theory.

Saying " just not allowed " is meaningless in a country of laws; the relevant law, down to the section number, or the rule framed under a law, under which something is not allowed, also needs to be quoted, in order to be credible.

Because the currency isn't invalid as long as banks accept it for deposit. If the said store is going to pay income tax on the income represented by these deposits, there is no law they can be accused of breaking.

Mods, delete this post if not in sync with a forum rules.

Sir, I have been reading your posts in this thread, and I'm sorry to say you're trying to mislead a lot of people, telling them it's okay to use old currency notes for transactions when they are not. It's a request please refrain from doing so. Apart from a few listed avenues, these notes are NOT to be used. PERIOD. Please don't try to find loopholes even if there might be some. Let's be honest citizens first.